Germany's Angela Merkel, addressing a news conference yesterday, sent the euro into a tailspin as she ruled out beefing up a bailout fund for debt-stricken eurozone economies.

Stock markets across Europe slid into the red today and currency traders buffeted the euro as doubts grew over whether last week's European Union deal can stem the immediate debt crisis.

Markets were put additionally on the back foot by the Federal Reserve, which last night warned Europe's sovereign debt crisis could hurt the U.S. economy but failed to signal fresh action to stimulate growth.

That sent Wall Street shares into reverse and the FTSE 100 index reacted today by slipping 36.11 points to 5,454.0. The leading German and French indices were also 1 per cent down.

The euro meanwhile struggled to remain above the $1.30 mark, having hit 11-month lows yesterday as doubts emerged in several countries over whether the EU agreement struck late last week will ever come into force.

Germany’s Angela Merkel did not help matters by ruling out beefing up a bailout fund for debt-stricken eurozone economies.

Ratification of a deal creating an effective single EU economic government appeared fraught with difficulty last night in Sweden, Holland, Denmark, Finland and the Czech Republic.

There are even doubts over whether France will implement the package after its main opposition party – currently on course to oust Nicolas Sarkozy in elections in April – rejected the deal.

And alarming figures suggested Greece is potentially in the grip of a run on its banks, with around 20 per cent of deposits withdrawn since the start of the year.

David Cameron's EU veto has given the Tories a major poll boost, putting his party ahead of Labour for the first time this year.

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However, there are fears he could face an ambush in the new year from Eurosceptic backbenchers keen to force Commons vote on Britain's relationship with Europe.

A senior member of the Tory backbench 1922 Committee told The Times: 'I can imagine that happening. The Prime Minister has bought himself time. But if there's an impression we squander it, then there could be difficulty.'

In a separate development, fears are raised that the UK has been tied into a further bailout of indebted eurozone countries that may run to tens of billions of pounds following the EU summit in Brussels last week.

A further €200billion injection to the International Monetary Fund (IMF) from all European nations was announced following the summit on Friday. Officials said a further comparable amount could also come from non-European nations.

But there is confusion about the proportion of the €200bn European element that will come from non-euro countries, such as Britain.

The Telegraph newspaper reports today that IMF chief Christine Lagarde told her organisation's own outlet, Survey Magazine, that €150billion would come from single-currency nations, with the remaining €50billion to come from countries outside the eurozone.

As by far the largest of the non-euro EU countries, Britain would face the lion's shares of that bill. The Telegraph said the UK contribution could reach £30billion.

That fear was compounded by confirmation from Germany's central bank, the Bundesbank, that it was being asked to stump up further €45billion for the IMF. That total suggests the Germans are contributing a GDP pro-rata share of €150billion, rather than €200billion.

BUT WILL FRANCE ACTUALLY IMPLEMENT THE PLAN?

Despite Nicolas Sarkozy being a key player in putting together the euro rescue deal there are doubts over whether France will actually implement it.

There are now less than five months before the country's presidential elections and Sarkozy (pictured below yesterday) is battling to catch up with his Socialist rival Francois Hollande who on Monday that he would seek to renegotiate the terms of the latest euro zone rescue plan if elected.

Furthermore, former French prime minister Dominique de Villepin, who was cleared in the courts of being part of a smear campaign against Sarkozy, declared this week he will run as an independent in the election race.

He criticised Mr Sarkozy for not protecting France's interests at a recent EU summit and imposing several rounds of budget cuts.

European leaders agreed in Brussels on Friday to draft a new treaty for deeper economic integration and tougher budget discipline, with near-automatic sanctions for those whose deficits overshoot.

'Without economic growth we will achieve none of the targets on deficit reduction,' said Hollande, who said the accord was insufficient both as a short-term answer and a long-term solution to the continent's sovereign debt crisis.

The deal seeks to end almost two years of turmoil in financial markets. Hollande's promise to challenge it irked the conservative UMP party of Sarkozy, who hopes the tricky process of ratification across the region will be wrapped up by by March. Hollande is ahead in opinion polls although his lead has narrowed in recent weeks as Sarkozy has striven to make progress on the euro rescue plan.

Amid bitter recriminations in Brussels over the Prime Minister’s decision to veto last week’s attempt at a new EU-wide treaty, senior figures said they would now try to strip Britain of its annual EU rebate in an act of vengeance.

The rebate – which has reduced the size of the UK’s contribution to the EU budget over the past 25 years by billions of pounds – including £2.7billion this year, was won by Margaret Thatcher but is up for renegotiation soon.

Former Belgian prime minister and Liberal MEP Guy Verhofstadt refused to speak English to deliver his speech on the summit, saying: ‘I shall speak my native language today because I don’t think English is a very appropriate language to use.’

He added: ‘When you are invited to a table, it is either as a guest or you are part of the menu. That can happen.

‘This selfish British strategy of protecting the City is one we cannot tolerate any longer.’

Joseph Daul, leader of the largest party in the European Parliament, the centre-right European People’s Party – from which the Prime Minister withdrew his Tory MEPs on coming into office – said Mr Cameron had acted with no consideration for EU solidarity.

He told MEPs: ‘I believe the British rebate should be put into question.

‘Our taxpayers’ money should be used for things other than rewarding selfish and nationalistic attitudes.’

But the markets believe that the creation of a strong ‘firewall’ to prop up debt-laden European economies and the recapitalisation of European banks are far more important than institutional changes to the EU.

Mrs Merkel’s refusal to support proposals to strengthen the European Stability Mechanism – a permanent rescue pot due to come into force next year – drove the euro down on the international markets.

Mrs Merkel’s refusal to support proposals to strengthen the European Stability Mechanism – a permanent rescue pot due to come into force next year – drove the euro down on the international markets.

It fell to an 11-month low against the U.S. dollar and a nine-month low against the pound.

Analysts said the prospect of a string of credit ratings downgrades to eurozone countries, including Germany and France, was also weighing on the euro.

And data from Greece revealed that a record €6.8billion was taken out of corporate and household bank deposits in Greece in just one month, meaning deposits have fallen by 20 per cent this year.

Joseph Daul, leader of the largest party in the European Parliament, the centre-right European People’s Party – from which the Prime Minister withdrew his Tory MEPs on coming into office – said Mr Cameron had acted with no consideration for EU solidarity.

He told MEPs: ‘I believe the British rebate should be put into question.

‘Our taxpayers’ money should be used for things other than rewarding selfish and nationalistic attitudes.’

But the markets believe that the creation of a strong ‘firewall’ to prop up debt-laden European economies and the recapitalisation of European banks are far more important than institutional changes to the EU.

Mrs Merkel’s refusal to support proposals to strengthen the European Stability Mechanism – a permanent rescue pot due to come into force next year – drove the euro down on the international markets.

It fell to an 11-month low against the U.S. dollar and a nine-month low against the pound.

Analysts said the prospect of a string of credit ratings downgrades to eurozone countries, including Germany and France, was also weighing on the euro.

And data from Greece revealed that a record €6.8billion was taken out of corporate and household bank deposits in Greece in just one month, meaning deposits have fallen by 20 per cent this year.

Former Belgian prime minister and Liberal MEP Guy Verhofstadt (left) with Joseph Daul (right) leader of the largest party in the European Parliament. Mr Verhofstadt said during his speech on the summit: 'This selfish British strategy of protecting the City is one we cannot tolerate any longer'

BANK OF ENGLAND'S WARNING OVER 'SHADOW' OF EURO DEBT

The Bank of England yesterday warned that the debt crisis in the eurozone ‘is casting agrowing shadow’ over the British economy.

Spencer Dale, the chief economist on Threadneedle Street, said the outlook has deteriorated ‘very markedly’ as the single currency ‘lurched from one mini crisis toanother’. He said Britain was under threat from a second credit crunch as lending between banks and to households and businesses dries up.

He defended the Bank of England’s decision to launch a second round of quantitative easing worth £75bn in October – dubbed QE2 – taking the total to £275bn.

Dale said ‘there is certainly scope’ for yet more QE next year if the economy falters.

But he warned that inflation may not fall as fast as expected. Official figures yesterday showed it dropped from 5pc in October to 4.8pc in November.

‘I hope, and expect, that 2012 will come to be seen as the year in which inflation fellback,’ said Dale.

He blamed the weakness in the economy in 2011 on ‘a sharp fall’ in household spending as family finances were squeezed by low wage growth and high inflation. He said the outlook for 2012 was bleak due to the crisis in the eurozone.

‘The recovery is likely to have come to a standstill in the final quarter of this year,’ said Dale.

‘Growth is likely to remain very weak during the first half, before gaining some traction thereafter as the squeeze on households’ real incomes comes to an end.

‘But this depends on the eurozone being able to implement a credible and effective response to the substantial challenges it faces. Failure to do so poses the single biggest threat to our recovery.’

Chris Huhne launched an outspoken attack on Nick Clegg yesterday as senior Liberal Democrats began to openly question his leadership.

The row over Britain’s veto of the EU treaty turned into a civil war in the party as the Energy Secretary rounded on his leader during a heated Cabinet meeting.

At the same time, Lib Dem MPs and peers privately questioned Mr Clegg’s competence after he first backed the Prime Minister’s stance and then turned on him.

Party sources said the only thing stopping a leadership challenge to Mr Clegg is the lack of a credible candidate that would please the Left and Right of the party.

Party grandees, including Baroness Williams and Lord Ashdown, were last night said to be in a state of despair that Mr Clegg was ‘asleep on the job’ when the key decisions were being made by David Cameron in the small hours of the morning.

Privately some have branded him a ‘lightweight’ and said he had failed to plan properly for the crunch summit.

Mr Clegg agreed a negotiating position with Mr Cameron before the summit but was surprised to be woken at 4am on Friday morning to hear that he had used the veto to block a new EU treaty.

Amid signs that Mr Clegg’s position is weakening, Mr Huhne – his former leadership rival – was accused of ‘disloyalty’ after denouncing the failure of Mr Cameron and the Lib Dem leader to consult him before the decision was made.

Mr Huhne insisted that as deputy chair of the Cabinet sub-committee on European affairs he should have been kept informed of developments hour by hour.

A source at the meeting said: ‘Chris Huhne said he should have been consulted. It was quite a disloyal thing to say since it was clearly aimed at Nick as well as David.’

LIB DEMS SNUB CAMERON

Nick Clegg and his Liberal Democrat MPs delivered a further snub to Prime Minister David Cameron last night by failing to support a Commons motion praising his controversial decision to veto a European treaty.

The Deputy Prime Minister, who failed to appear in support of Mr Cameron during his appearance in Parliament on Monday, did not take part in the vote as part of a co-ordinated plan by the party's 57 MPs to abstain.

The co-chairman of the party's international affairs backbench committee, Martin Horwood, told MPs the outcome of the Brussels summit was 'not a good one'.

The Cheltenham MP was the only member of his party to speak during the three-hour debate on a motion tabled by the Democratic Unionist Party which commended Mr Cameron's stance while recognising 'the desire of the British people for a rebalancing of the relationship with our European neighbours'.

The motion was supported by the Tories and comfortably passed by 278 votes to 200, majority 78.

But Mr Horwood told the Commons: 'It's reasonably common knowledge that the Liberal Democrats think the outcome of last week's summit in Brussels was not a good one.'

The Energy Secretary twice interrupted the Prime Minister as he explained his decision to colleagues. Mr Huhne is privately understood to regard Mr Cameron’s negotiations over the treaty as ‘cackhanded’

There was fresh fury last night after Mr Clegg’s MPs were told they should back a motion tabled by the DUP praising the Prime Minister’s decision to wield the veto. One MP said: ‘He has had three policy positions in four days.’

There was also fury among the Lib Dems at Mr Clegg’s decision to dodge Mr Cameron’s statement to the Commons on Monday. His Parliamentary colleagues had asked for him to attend, but Mr Clegg followed the advice of his inner circle to keep a low profile.

Senior sources told the Mail the decision was made because Lib Dem focus groups have revealed that the party’s supporters ‘hate seeing Nick sitting mutely next to Cameron getting beaten up when he can’t respond’.

Mr Clegg attempted to get back on the front foot yesterday, demanding that the Government start to ‘focus’ on positive engagement with Europe.

‘Nick’s message was that we’ve got to undertake a process of constructive re-engagement with Europe right across government,’ an ally said.

The Deputy Prime Minister will now use his extensive contacts in Europe to seek to build bridges in the hope that Britain could strike a deal with the other 26 countries in the EU. He will speak to Commission President Jose Manuel Barroso and EU President Herman Van Rompuy as well as old friends from his days as an MEP.

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Euro in a tailspin: Rescue deal for single currency under threat as markets take a fright